The dominance of the dollar in the foreign exchange market is becoming clear. Speculators are actively moving in anticipation of US President Trump’s policies, and some say that the exchange rate against the yen is again within the 160 yen range. Image taken on November 7 (2024 Reuters/Dado Ruvic/Illustration)
TOKYO (Reuters) – The dollar is becoming a clear winner in the foreign exchange market. Speculators are actively moving in anticipation of the US President Trump’s policies, and some say that the exchange rate against the yen is again within the scope of 160 yen. On the other hand, unlike 2016, when Trump won his first victory, this time the euro is targeted for sale due to strong political and economic instability. Unlike the last time, it is difficult to imagine that the yen falls in full, which is likely to affect the ability of the dollar to appreciate against the yen.
After the presidential election, in which Mr. Trump clearly had the upper hand, dollar purchases have been gaining momentum with expectations of an increase in inflationary pressure due to tax increases and an aggressive fiscal policy . The dollar index, which measures the dollar’s price movements against six major currencies, hit a new high since the start of the year, and against the yen it has already risen more than 3% since the election to rate of 156 yen, the previous rate increase in the Bank of Japan interest rate in July.
In November 2016, when Trump was finally elected, the dollar rose 8% from a low of 101 yen on the 9th, Japan time, to 109 yen a week later. The price movements were very large, partly because Mr. Trump’s victory was not expected, but the general picture of the “Trump Rally”, in which the dollar strengthens, US interest rates rise , and stock prices rising rapidly at the same time, remained the same.
However, if we look at these movements with the circle as the main axis, we see another side. In 2016, the Bank of Japan introduced negative interest rates and long-term and short-term interest rate control (yield curve control) in January, and many people expected the yen to weaken in the future, continuing to intense sales. In the two weeks after the election, the Australian dollar was the biggest sell-off, down 11% among major currencies, and its decline was almost double that of the Australian dollar, the second best seller.
However, this time, it wasn’t the low-interest yen that sold the most last week, but the euro. Next was the Swiss franc, and then the yen, which continued to decline along with the British pound. The trend is in stark contrast to the general decline of 2016.
Currently, Japan’s policy interest rate is 0.25%, which is still the lowest among major countries, and it is only one quarter of 1.0% in Switzerland, the next lowest. Even if there is an additional interest rate hike, the difference between the yen and the US, which has maintained the 4% range, is too large, and the situation will not change where the yen, which is more lower than the yen due to the difference in interest rates, tend to be sold.
What has changed is how participants perceive rising interest rates. At a press conference after the monetary policy meeting in October, Bank of Japan Governor Kazuo Ueda announced that he would no longer use the term “time dividend,” and the market took this as a hawkish change “money with higher interest rates ” which could raise interest rates at any time,” said Keiichi Iguchi, senior strategist at Resona Holdings.
Given that we are entering a cycle of interest rate hikes that are at odds with those of other major countries, and that the weaker yen may also help decide whether to raise interest rates, we believes it will be difficult to sell the yen as easily as we have. in the past.
The history of the Japanese government and the Bank of Japan in carrying out the largest ever yen buying intervention several times will also be a hindrance to the depreciation of the yen. Many say that the intervention line that market participants are keeping in mind right now is the point where a challenge to 160 yen, the highest level in 38 years, will materialize, and even after breaking above 155 yen, which is considered psychological. milestone, there is still tension.
However, the difficulty in recognizing the decision to intervene puts a psychological barrier to yen sales. A foreign bank operator explains. “If the dollar suddenly rises above 160 yen in a few days, there is a high chance that it will be seen as too volatile and an intervention will be necessary.” On the other hand, he said. , “As long as U.S. interest rates rise and yields gradually reach the 160 yen level, and yen speculative sales haven’t picked up as much, it’s unclear whether it will happen.”
A research team from Barclays in the UK estimated that if the US were to raise tariffs as Trump says, the impact on real domestic product (GDP) would be -2.0% for China and -1 for the US ．4 %, and the highest value of the ECU sector was 0.7 Euro. “If the United States raises taxes on every country, production in every country will decrease.”
Economic indicators have continued to decline due to political uncertainty at home and abroad, and the euro has fallen below $1.05 against the dollar, its lowest level in a year. The exchange rate against the yen is currently in the 164 yen range, with significant upside after the US election, and well behind the high of 174 yen reached in July.
If China, the target of the next Trump administration, falls into a major economic slowdown, the impact will spread to many other countries. On the 12th, when it was reported that Trump would nominate Senator Marco Rubio, known for his tough stance on China, as secretary of state, Chinese stocks fell sharply and the yen rose broadly in the foreign exchange market.
According to the activity status of the non-traded sector of IMM currency futures compiled by the US Commodity Futures Trading Commission (CFTC), the speculative sale of yen was 44,000 units as of November 5, just before US election, compared to 2 in the previous November. week. . Since the yen is likely to weaken further after that, and yen sales are likely to rise even further, speculative yen sales could reverse sharply if there is any disruption.
(Shinji Kitamura Editing by Hiroshi Hashimoto)
Our code of conduct:Thomson Reuters “Principles of Trust”
2024-11-15 12:05:00
#Angle #24th #edition #Trump #rally #speculation #focuses #euro #reducing #yens #decline
